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Lord Lucas moved Amendment No. 374:

The noble Lord said: I should be grateful if the Minister would tell me what has changed and what is the purpose of this change to the Freedom of Information Act 2000. I note that her forces have departed. If we can string this debate out for five minutes or so and I call a Division, we might have some interesting results. Please do not hurry. I beg to move.

Lord Davies of Oldham: I am sure that the noble Lord is in error when he suggests that any Member has departed from this absorbing debate. Everyone was waiting agog for Amendment No. 374 to be moved. It gives me great pleasure to be able to reply to it.

Amendment No. 374 would delete the application of the Freedom of Information Act requirements to nursery school governing bodies. This requirement is consistent with our policy of bringing the requirements on the new governing bodies into line with the requirements on the governing bodies of more maintained schools. Currently, nursery schools are covered by the Freedom of Information Act through the duty that Act places on LEAs. Requiring nursery schools to have statutory governing bodies means that

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for the purposes of the Freedom of Information Act those governing bodies become the relevant public authority. This makes explicit what is implicit in existing legislation. It applies to maintained nursery schools the same legislation that applies to other maintained schools.

We are considering how best to support nursery schools and LEAs to make the transition to a statutory governance regime. That and all other consequential requirements which flow from requiring nursery schools to have governing bodies will be taken into account. I hope that the noble Lord will accept that explanation.

Lord Lucas: I am disappointed to say that that is a perfect reply. I have no alternative but to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 21, as amended, agreed to.

Schedule 22 [Repeals]:

Baroness Ashton of Upholland moved Amendments Nos. 375 to 379:

    Page 208, line 11, column 2, at beginning insert "In section 23, in subsection (2), paragraph (f) and the word "and" immediately preceding it, and subsections (3) and (4)."

    Page 208, line 14, column 2, leave out "and 44" and insert ", 44 and 214(a)."

    Page 208, line 21, column 2, at beginning insert "In section 29, in subsection (2), paragraph (f) and the word "and" immediately preceding it, and subsections (3) and (4).

    Page 208, line 22, at end insert—

School Standards and Framework Act 1998 (c. 31) In Schedule 30, paragraph 215.

    Page 209, line 20, leave out "9(2)(c)(ii)" and insert "98(2)(c)(ii)"

On Question, amendments agreed to.

[Amendments Nos. 379A and 379B not moved.]

Baroness Ashton of Upholland moved Amendment No. 380:

    Page 212, leave out lines 1 and 2.

On Question, amendment agreed to.

Schedule 22, as amended, agreed to.

House resumed: Bill reported with amendments.

Land at Palace Avenue, Kensington (Acquisition of Freedhold) Bill

Reported from the Unopposed Bill Committee without amendment.

        House adjourned at twenty-eight minutes before three o'clock.

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Official Report of the Grand Committee on the

Tax Credits Bill

Tuesday, 28th May 2002.

The Committee met at half-past three of the clock.

[The Deputy Chairman of Committees (Lord Brougham and Vaux) in the Chair.]

The Deputy Chairman of Committees (Lord Brougham and Vaux): I shall remind noble Lords that there will be no Divisions in the Committee; we shall speak standing and observe the rules of procedure as on the Floor of the House. If there is a Division in the Chamber we shall adjourn for 10 minutes and the noble Lord who is speaking will continue afterwards.

Clause 25 [Liability of officers for sums paid to employers]:

[Amendment No. 160 not moved.]

The Earl of Northesk moved Amendment No. 161:

    Page 18, line 2, leave out "or neglect"

The noble Earl said: In moving Amendment No. 161, which stands in the names of my noble friends, I shall speak also to Amendment No. 162. The amendment seeks to leave out the words "or neglect". Obviously it is right that culpable officers should be liable for any fraudulent conduct—we have no complaints about that—but neglect is a different matter, albeit I acknowledge that some cases might give rise to difficulties if they are on the cusp between neglect and fraud.

In part, at least, we return to the point of principle that I have referred to in previous debates. Why should companies be held liable for neglect when they are being required to do the Inland Revenue's work for it? The system of tax credits is undeniably complex. As we have sought to point out on many previous occasions, it is wholly credible, particularly in the small business sector, that this complexity will cause companies difficulties. Mistakes will undoubtedly occur. In very many cases neglect—the perception that a culpable officer has not acted with reasonable care—will arise directly from the imposition by the Government of the requirement to pay tax credits through the payroll. To this extent, liability of culpable officers for neglect is inappropriate. Alternatively, if the Government are determined upon a neglect test, it needs to be drafted more precisely.

It may be convenient for the Committee if I deal with a related point here rather than initiate the clause stand part debate in due course. We are uncomfortable with the scope of the definition of "culpable officer". It seems over the top that a secretary, who is simply complying with the terms of his or her contract of employment and pushing the right buttons on a

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computer to operate the payroll system, should suddenly find himself or herself liable for fraud or neglect. I hope that the Minister can give the Committee some comfort on this point. I beg to move.

Earl Russell: I have a very limited degree of sympathy with this amendment. It is important that fraud and neglect should not be confused. Fraud must demand the element of mens rea, a conscious and deliberate desire to offend. Neglect has no such demand. Neglect is a simple failure to notice that one ought to be doing something.

However, the point still remains that ultimately we have here a duty of care being placed upon the employer. Neglect of that duty of care must remain an offence. Were the noble Earl, Lord Northesk, to consider rewording the amendment in a way which leaves neglect as an offence, but a less severe offence than deliberate fraud, we on these Benches might take an interest and wish to discuss the issue further.

Lord McIntosh of Haringey: The first thing to make clear is what is meant by "neglect". In common parlance it could be something which is quite—I will not say benign—without malign intent. In law and in this Bill it means something quite specific—that is, a failure to take reasonable care; and, in this case, reasonable care with someone else's money.

Let me make clear how this fits into Clause 25, which allows regulations to be made to hold an officer of a company—in practice usually a director—personally liable in a situation where excessive funding had been obtained to make payments of working tax credit and not repaid, provided that the debt was believed to have arisen through the fraud or neglect of that person. The amendments would cut out the neglect criterion.

We believe that people should not be able to set up companies, obtain funding for tax credits and then become insolvent on a regular and deliberate basis. These powers should not apply simply because a company has a tax credit debt when it becomes insolvent; that happens far more often and everybody suffers when it happens. In this case, we are talking about something more precise. We would only use the provisions made possible by the clause in cases where there appears to have been deliberate exploitation of a company's limited liability and the tax credit system used for a director or other officer's personal benefit. We can come to the personal benefit issue when we talk about the definition of culpable officers, which I understand the noble Earl, Lord Northesk, wants to deal with on clause stand part. Or does he want me to deal with it now?

The Earl of Northesk: Now, please.

Lord McIntosh of Haringey: "Culpable officer" is defined as,

    "any director, manager, secretary or other similar officer".

In other words, it is a person with a position of responsibility in the company and it could not catch clerical staff. It means, of course, the company

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secretary. These provisions would be used when a director or a company secretary who had the same ability and the same responsibility as a director were deliberately using the system for their personal benefit.

There are two reasons why we believe it is right to maintain the negligence test as well as the fraud test. Negligence means a failure to take reasonable care. Where companies receive significant sums of public money to fund the payment of working tax credit to their employees, the officers of the company should be expected to take reasonable care to ensure that the money is used for that purpose.

Secondly, there are practical difficulties with a test that only covers fraud. There will be cases where it is clear that there has been either fraud or neglect, but it may be hard to show categorically that there has been fraud rather than neglect. The danger is that the amendment would allow deliberately dishonest people to hide behind the cloak of negligence and make it more difficult to counter such abuse.

There is nothing new about this provision, either in terms of the approach taken towards those who exploit the limited liability of companies or in its potential application to cases where there has been negligence on the part of the officer of the company. It is not only that these tests already apply to working families' tax credit and disabled person's tax credit; but they have also applied for many years to national insurance contributions. Amending the clause in the way that the amendments suggest would be going back beyond the previous tax credit system to national insurance contributions. I do not believe that that is what the noble Earl, Lord Northesk, is looking for.

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